Farm Horizons, Oct. 2015

Farm decisions and the next generation

By Myron Oftedahl
Farm Business Management Instructor, South Central College

Will your farm continue to make decisions and operate the same way as you bring the next generation into the operation? Should it continue to operate the same way?

This article will continue the discussion from previous articles concerning farm transition planning.

How do you operate your farm now? Do you have a little pocket notebook that you write down varieties and planting dates? Do you write down the planter settings, sprayer settings, and constants for the grain monitor in the combine? Do you have descriptions as to how you enter income and expenses into your accounting?

Does the next generation or your spouse know where this notebook or description list is located? How many times over the course of your farming career have you lost this notebook? If you have some standards written down, would it make it easier to explain to the next generation why and how you have done things?

These are standard operating procedures; every major business has them, and now it is time to incorporate them into the management of our farms.

Having standard operating procedures make it possible for multiple operators to accomplish the same thing with similar results.

Let’s take a look at some examples of how this may work.

• Let’s start with the planter settings. If you normally plant at 2 inches deep with 8 pounds of air pressure at 5 mph, do you have this written down anywhere? How do you decide when you would deviate from these normal settings? Is it reliant on soil moisture, size or shape of seed, or other field conditions? Would your son/daughter or hired help evaluate these conditions the same? Could you develop a quick decision chart to help make these decisions?

• The same thing is true of the sprayer settings. Which nozzle do you use? What speed and pressure do you use? Do you have the monitor constants written down? What criteria would make you change these settings? You may use a different nozzle or drive slower with less pressure if it is windy versus a normal day. You may use more surfactant if it has been dry for a while. Again, could you develop a decision chart to help make these decisions?

• Now, let’s look at the accounting. I always have my farms include pickup license tabs and insurance with their repair expense for the pickup.

What is the standard for your farm? Is the rent for your parents’ farm listed as rent, or owner withdrawal?

You use the same headings for your bookkeeping each year. These headings most likely match the descriptions on the Schedule F for tax purposes.

Could you make a list of these descriptions and then include your criteria for what would get entered under each category? Would this make it easier for someone else to do the farm recordkeeping and be consistent from year to year?

Can you start to see how standard operating procedures would be useful on your farm? Would it help the next generation as they become a part of the operation? Would it be helpful if you have hired help?

The one drawback to standard operating procedures is that they can become rigid. You can point to the item on paper in black-and-white, and say, “That is not the way that we have done this before.”

Standard operating procedures will evolve, and need to evolve over time.

When you trade equipment, there is a pretty obvious reason. What if you learn that you could use the same piece of equipment, but it operates more efficiently at a slightly different setting?

We can develop standard operating procedures for selecting varieties, choosing crop protection programs, when to replace equipment, accounting, or any type of decision-making.

• One other form of a standard operating procedure is a job chart. First, you create a list of all of the jobs that need to be done on the farm over the course of the year. Then, you create a spreadsheet with those jobs and assign them to the various members of your farming team.

So, you may be responsible for choosing the herbicide program, but your son is responsible to get the spraying done, and you daughter-in-law needs to be informed which chemicals are for which crop so that she can do an accurate job with the accounting and other record-keeping.

So, create the spreadsheet with the various jobs going down the left side of the page, each family member or employee would have a column, and then indicate who is responsible for decision-making, who actually does the work, and who needs to be informed.

This type of job spreadsheet can be very useful in farm transition planning, because we have made some clear boundaries as to who is to do what. This can eliminate, “I thought you were going to do that.”

It allows you as the boss/employer/father to do a more accurate son/daughter/employee review. Now, you can go through the list and ask, “Did you do these job items? Could you use help, or do you have questions about a job?”

The job list is also a great tool to assign jobs to who is most capable to do them. Maybe your son-in-law does a better job of grain marketing, maybe your son and daughter-in-law do a better job with the cows. You, as the farm manager, need to assign the jobs to the person who is most suited for that job and be a mentor for that person. You also need to give them the responsibility that goes along with the job.

Farm transition can be a scary time on the farm, but if you create a job spreadsheet and some standard operating procedures to use, the transition will go smoothly and the farm operation will continue to prosper.

For more information, contact a farm business management instructor.

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